January 24, 2008
The market was able to follow through on yesterday’s gains with another positive day. A better than expected jobs report, a positive AT&T earnings report, and an economic stimulus plan that should be able to put some money back into the hands of Americans, gave this market all the reason it needed to continue its rally.
There is some disappointment in terms of conviction of the buyers in this rally today. The volume dropped off dramatically as the shorts weren’t covering their positions at all, which makes us believe that they may be letting the market rally a little bit more before pouncing on it and sending the markets down once again. A likely area for the bulls to run out of steam and the bears to begin making their presence known, would be when this rally runs into resistance at the lows from August.
Continue to exercise patience in this market, as it is still in a bearish downtrend, and until this is broken, the risk-to-reward ratio is clearly not in the favor of the buyer. Don’t throw caution to the wind.
Let’s review the charts…
NASDAQ was by far the day’s best performer rallying almost 2% on the day. However, volume was weak and we remain skeptical as to whether this rally is sustainable. Any trouble will send the buyers with their newly committed capital quickly to the exits.
Volume was horrid even though the index managed to rally 1% on the day. We still urge our readers to remain cautious and not try to jump in this rally too quickly. The bears are going to eventually show themselves in an attempt to send the markets down once again.
